In today's episode, Tyler breaks down a turbulent start to the week after the Chinese company Deepseek AI sent ripples through the financial world. However, Tyler also covers the bright spots on the day that the financial mainstream media may have missed. We’ll also look ahead to a busy earnings week and a key FOMC meeting. Tune into today's podcast to learn more.

Don’t look back because the market is closed. Good Monday afternoon, everyone. Tyler Herriage here with you for today’s VRA Investing podcast. Hope you all had a great weekend out there. Hope you had a great start to your week this week as well. Where to begin? It certainly was an eventful start to the week this week. And if you’re a regular listener here of the vra, you know that Kip and I have a running joke that he always gets the big updates and I inevitably get the big down days here, and I certainly was no exception here today. But I will take a step back here and say if you’re able to listen to my podcast on Thursday, I was pretty grateful to get a day of all time highs last Thursday for the s and P500.

And as we say here, often new highs beget new highs. So the good news here, if our pattern rings true, that I get the big down days and Kip gets the big up days, then tomorrow should be a nice turnaround Tuesday for us here in the market. I’ll give some specific reasons, reasons, some serious reasons on why that might be the case for tomorrow and really a lot of examples of the strength and resilience that this market showed today, despite the fact that the Nasdaq finished down over 3% on the day. So obviously headlines not pretty at all. But wow, there was some serious strength underneath the surface of this market today that did not get talked about in the financial mainstream media almost at all here today. So we’ll cover a few of those points here today. We’ll talk about the reaction that we saw in our market today from this deep seek AI news that came out over the weekend. We’ll cover that pretty in depth here today.

Tyler Herriage [00:02:10]:
And then the high notes though as well. We did get the Dow finishing positive. We did see transports leading the way as well. And then what we saw in our internals today will almost certainly impress you here. So stay tuned. We’ll get to that here in a few minutes. But first and foremost, if you’re just getting off of work here, tuning into the podcast, checking your portfolio after a day in the office today, I’m, I’m, I’m sure that you’re surprised at what you’re seeing, right, because it was a big sell off today with the NASDAQ down 3% and the semis brutal day down 9.8%. Won’t sugarcoat it there.

Tyler Herriage [00:02:53]:
And of course the story with Nvidia that I’ll get to here in a second, which was down nearly 17% today. So, again, very scary headline numbers today. We certainly don’t blame anybody for being a little freaked out seeing those kinds of numbers out there. But, you know, as we get into this here, you’ll see the, the bright spots that Kip and I, we just talked about this before the podcast as well that we’re seeing in this market right now. So a quick little recap of what we saw over the weekend where we saw Deep Seek AI, a Chinese company, here revealing what is being seen as a significant breakthrough in the processing power of AI models. Right? They had their AI system, which has been around for some time. They sent out an updated version of it that has now outperformed all of the US leading AIs. That’s chat GPT, that’s Facebook’s llama, that’s Claude.

Tyler Herriage [00:03:58]:
I did not see a whole lot of studies with GROK in there. I think Grok is kind of in its own category as well. But the testing of these, you know, they have these standardized models that they send these AI systems to take their tests. And really, for the last year and a half, really since 2022, when chat GPT was announced, we’ve seen some back and forth from the American companies as well, where we’ll see Chat GPT leading the way by seemingly insurmountable odds in math, in science, and in analyzing legal documents as well. Right. And it’s outperforming all of the other models, and then you’ll have another AI like Claude or Grock take the lead another month later. So this is just another, you know, disruption here for ChatGPT and the other AIs, where now the fear is, though, that it is a Chinese company doing it. Right.

Tyler Herriage [00:04:56]:
And of course, the surface level fears of what are they going to do with the data that people are inputting into these AI systems. But the fears do go much deeper than that. I’ll try to quickly recap this here, is that not only is this a Chinese company, but because of the restrictions on our semiconductor chips in China there, you know, sanctions against China that we’re not allowing the sell of the latest Nvidia chips over there. So they were able to do this on, you know, allegedly here, supposedly they did this on outdated Nvidia hardware. And they did so for just roughly less than $7 million. When you have the mega caps out here spending hundreds of millions, if not billions of dollars on these massive data centers, on their interfaces for their AI. And a company, you know, kind of a bootstrap startup kind of company in our one of our largest adversaries, right, was able to do this not only on outdated hardware, but for 10x cheaper than their US counterparts. So that’s what’s really scaring the financial world today and specifically Nvidia, that hey, maybe there, if we can move towards a more efficient software platform, maybe, maybe we don’t need the brand new Nvidia hardware out there.

Tyler Herriage [00:06:21]:
And so that’s why Nvidia is hit so hard today. And it the scare is that the US might be far behind on the software side of things. We can’t forget they still did it on Nvidia chips, right? So the fear is that we’re way overspending on these massive AI data centers that require also massive amounts of energy to to be operational. So the fear, to say it again, and many predictions here for AI of what we’re going to have to spend going forward from our mega cap companies is starting to look like they’re just throwing a ton of money at what may be an outdated solution. So why do we need to invest billions of dollars in projects like Stargate if this small Chinese company just proved it can be done with with a much smaller setup on older chips? Now there’s all types of holes in this argument. First and foremost that Elon cast doubt on already was the possibility that they built this on old Nvidia hardware. Essentially, you know, saying that it’s obvious from a tweet that says yes, China does have access to our latest Nvidia chips, but they can’t talk about it because of US export controls. You know, they, they reroute these purchases through other countries so that they can get it.

Tyler Herriage [00:07:43]:
And I’m certain that China could do that without a whole lot of issue really. So you know, that’s a key hole in the argument there. The other portion of this is that deep seeks AI platform. The base of it is actually Chat GPT. The difference is their user interface and the way it pulls the data in a more one energy, energy efficient manner. And it’s open source software as well, so we can copy it, that’s a great thing. But it also shows the work behind its thought process to answering your questions. So in a lot of ways can be seen as leaps and bounds ahead of what our AIs are doing here in the us but who’s to say that we won’t catch up to this very quickly? It could be before the end of the week where all of a sudden chatgpt is back ahead, right? Especially if this is built off the Chat GPT platform already.

Tyler Herriage [00:08:42]:
And it’s open source doesn’t sound as competitive now, once you start to break the story down. And again, the scrutiny here, like Elon pointed out of did they really do this? When did we start trusting news sources from China? Right? For years, people say, oh, they’re lying about their economic data, they’re lying about their employment data, they’re lying about all kinds of things. They’re stealing our intellectual property, right? How do we know this isn’t more of the same? And the point is now that we don’t, right, we don’t know this. So, yes, a day like today hurts, but there’s really the key here is the uncertainty. The market hates uncertainty. And that’s what this brought up here today. It exposed some potential vulnerabilities, but the action that we saw today from our markets does tell a different story. So I’ll dive into some of that here.

Tyler Herriage [00:09:38]:
But on days like today, it’s important to remember our primary themes here. And one of our primary themes going back to the bare market lows of 2022 that we wrote about in the Big Bribe, is that we are in the middle, if not early innings, of an innovation revolution. In one key theme, one feature of innovation is disruption. Disruption in innovation is a feature, not a bug here. And this is what Cathie Wood likes to say a lot times of difficulty foster innovation. So when our U. S companies have their backs against the wall, that’s the time when they can perform the best, right? And kind of the story goes here is that since China didn’t have access to the latest Nvidia chips, they had to get creative, right? They had to work with what they had. And what they ended up coming up with was something very impressive.

Tyler Herriage [00:10:38]:
So again, disruption here, but that doesn’t mean that it’s a terrible thing for the market, for the US Economy, doesn’t mean that we’re being beat by China. Again, it’s just disruption. And then we’re going to see a lot of that in the innovation revolution. And at the end of the day, I would point it out as a feature that actually makes us more bullish going forward. If we can start to build out AI systems that are more efficient than we’re currently doing without spending billions of dollars on, you know, these massive data centers, right, that again, are huge energy drainers. If we can do an more with this AI innovation revolution for cheaper, then why wouldn’t we want to do that? Right? So again, we look at this as just another story for the innovation revolution here. So all of this Being said, despite the uncertainty here, here is the VRA bottom line. Nothing has changed fundamentally yet for this market.

Tyler Herriage [00:11:47]:
We look at today’s move as a major reactionary move. Of course we’re staying on top of it here and we’re paying attention, locked in very closely. But we did see some strong pockets of action today that really had us encouraged. Yes, of course we want to see semis leading to the upside, not to the downside. But again, nothing has changed fundamentally. We’ve got a very busy earnings week coming up here. I’ll get to that in a second as well. But we do expect Q4 earnings to beat expectations and then we expect Q1 earnings of this year to exceed that as well.

Tyler Herriage [00:12:26]:
We also continue to see positives for GDP. We expect GDP to crush expectations as well in 2025 and the same goes for 2026. Nothing has changed in that regard. Companies have financial or, excuse me, very strong balance sheets right now as well from multiple different sectors. So again, the fundamentals haven’t changed here at all. The uncertainty though, is what scares the market. So that being said, if you’ve got any questions about the Deep Seat news, we’ll continue to cover it here. Or if you’ve got any special insights that I might have missed here today, reach out to us.

Tyler Herriage [00:13:07]:
We love getting your feedback as well at supportrainsider. Email us there anytime. So upcoming, still got an exciting week ahead today felt like a whole week in and of itself, but earnings this week we got a lot of earnings, 41% of the market cap of the S&P 500 is reporting this week. We really kick into high gear on Wednesday though, ahead of the Open we’ve got chip maker ASML and some other big names as well. But after the close is what everyone will be watching. We’ve got Tesla, Meta, Microsoft, IBM and more coming out Wednesday after the close. And we can’t forget that Wednesday. Wednesday is also an FOMC meeting as well this week.

Tyler Herriage [00:13:54]:
I’ll get to that here in a second too. Thursday, also a massive earnings day. UPS mastercard ahead of the Open. But again, similar story after the close is what everyone will be watching. We got Apple, Intel, Visa and more and some other big names on Friday too. So buckle up here. It’s going to be exciting week. We’ll be reporting on all these earnings here after the close every day on the VRA Investing podcast.

Tyler Herriage [00:14:20]:
You can sign up for that@vra letter.com but again, we can’t forget it is an FOMC meeting this week. Right now Expectations remain for a continued pause here from the Fed. You know, it’s going to be interesting to see this battle between Jerome Powell and Donald Trump. We know that Jerome Powell, even despite being put into his position the first time by Trump, he has no love for this guy. And the Fed can say time and time again they want to remain unbiased politically. We know that this is a very politically motivated Federal Reserve though. And not only will all eyes be on the FOMC meeting, but really his press conference. This will be his first speech since President Trump has taken office.

Tyler Herriage [00:15:10]:
Of course, it’s only been a week, but Trump has already said that he thinks the Fed should cut rates and he believes that they will listen to him as well. The question came out in an interview he was doing last week where they said, do you expect the Federal Reserve to listen to you? He paused and said, yeah, it’s a pretty funny response, but we’ll see if Jay Powell will listen to what our President has to say or not. Or will he take another confrontational approach similar to what he did during Trump’s first term, similar to what we saw in his Fed meeting since the November election. Remember, the Fed meeting took place just a week or so after the election in November. And when, when he was asked if Trump right, might remove him from his position, he repeatedly said not permitted under the law. Those five words were all he had to say in his answer and he had to repeat it again. Right. So gear up here, get your popcorn ready.

Tyler Herriage [00:16:14]:
Certainly going to be an eventful week. We’ll be here with you every step of the way. We of course do want the Federal Reserve to listen to Trump here and we think Trump is exactly right. Yields do need to continue lower. We saw that today. The 10 year was down over 2% now at a 4.52 down big from its recent high not long ago here at a 4.8 again, now all the way down to a 4.9. So, you know, our call, our long term call has remained that bond yields will head lower for a simple reason, gravity. We have the highest rates of any developed country out there, right? And we’ve got the safety and security of having the world’s reserve currency, the strongest debt market in the world.

Tyler Herriage [00:17:00]:
We, we expect money to continue to flow into our bond market, driving yields lower. Now, looking at our markets on the day to day, certainly a strange day of trading here as we had the Nasdaq down 3% but the Dow managed to finish up 610 of 1% on the day and finished at its Highs of the day today transports just what you want to see. We talk about this here often as well. You want to see the transports leading the Dow as well. We got that today with the Transports up over 1.4% on the day as well. Again we look at this as a testament to the strength of this bull market. If we were about to get a major sell off, the Dow almost certainly would not have finished positive on the day today. Next up, Small caps were down 1%.

Tyler Herriage [00:17:51]:
They were actually leading the way earlier today went positive before the Dow ultimately did finish lower. Then we had the S&P 500. Yes it finished down 1.46% on the daytoday but if you look at the chart here, we finished near the highs of the day to day. So you know, tough to say that’s a win but at least it’s a small positive there. Next up, oh also I’ll point this out. The Nasdaq was up over $0.06 of 1%. Nvidia is in the Dow. So that’s some serious strength from the other names in the Dow today.

Tyler Herriage [00:18:26]:
We saw a lot of strength in value names in the financials as well. Of course that helps when yields are down like they were today. Then finally Nasdaq again semis down big on the day today nearly 10%. Nasdaq down over 3% to 19,341. But there were some certainly some positives in the tech space as well. Apple up over 3% on the day today. We had some other big movers in tech today as well. You know I saw a big reversal from the lows of the day for Amazon which ended up finishing up a quarter of 1%.

Tyler Herriage [00:19:05]:
You know, still right at its all time high there and in after hours right now I have to point this out, the semis are now higher in after hours as well. So let’s see if we can get that turnaround Tuesday tomorrow semis SMH up over 1% in after hours trading. One other big positive here. Last Thursday I pointed out despite hitting all time highs that we were hitting heavily overbought levels on our short term VRA momentum oscillators. Now just two sessions later we’re out of those. So again another reason we could see a big turnaround Tuesday Tomorrow we no longer have to deal with overbought conditions after this sell off here. Next up, the internals on the day to day. This is probably one of the most impressive points of today’s action.

Tyler Herriage [00:20:01]:
Actually earlier in the session when we were negative across the board before the T The Dow went positive, the internals actually turned positive first. We did finish mixed on the day, but there were certainly some bright spots. We actually had more advancing stocks than declining stocks on the NYSE today. And then despite finishing down 3% on the day, we did better than 2 to 1 negative on the Nasdaq, just really slightly negative. We have had up days in the last year under Biden, you know, positive across the board days where the internals were worse than this. So we look at that as Another tell here. 52 week highs lows also managed to come in positive on the nyse, just slightly negative on the Nasdaq. Then lastly here, volume almost flat on the NYSE today and still not even a 2 to 1 downside move for the Nasdaq.

Tyler Herriage [00:20:57]:
So these internals tell us that under the hood this market remains very healthy here today. And the move today we likely see as a knee jerk reaction overall based off these internals. Again we wouldn’t, we wouldn’t be surprised to get a turnaround Tuesday, tomorrow again it wasn’t too long ago where we had positive across the board days with worse internals than this. So that’s certainly a bright spot on the day. Looking at our sectors, probably more bullish than you might have expected as well as we had the majority of our sectors higher on the day. Six out of our 11 sectors finished positive on the day. They were defensive sectors slightly. Consumer staples led the way, followed by healthcare, financials and real estate.

Tyler Herriage [00:21:42]:
But I’ve got to point this out, you know, instead of using the real estate sector for the S P, we like to use the home builder sector. And we look at this as a leading economic indicator. When housing is performing well, it bodes well for overall economic strength. XHB, the Homebuilder ETF was up 1.5 1.15% on the day to day and is leading the way on the month, up 7.6% now for the month of January, HGX, the housing index also up 7.2% on the month this month. So you know that’s certainly not a bearish occurrence to see housing leading the way. So another bright spot on the day then for our laggards. As you might expect, tech led the way lower. A little surprising see utilities after that as yields were lower on the day.

Tyler Herriage [00:22:35]:
Is interest rate sensitive group. You know, with yields this much lower, you’d expect to see utilities doing well. No concerns for us there. But again, six out of our 11s and P500 sectors finishing positive on the day to day. So we will take it finally here for today. Let’s get to our VRA commodity watch where we did see some more red on the screen here. Gold now down 1.3% still at $2,770 an ounce at the open today was just $1 shy less than a dollar an ounce away from its, excuse me, 15 at the highs of the day was $17 away from its all time high. So at these levels still just $52 away from its all time high again, gold at $2,770 an ounce.

Tyler Herriage [00:23:29]:
Silver down bigger nearly 2% to $3.57 a pound. Copper now down 1.8% to $4.24. I’m sorry, I might have quoted silver there. Silver and ounces at $30.57 an ounce, copper at $4.20. And then oil here, you know, getting hit as we get back to drill baby drill. As JD Vance pointed out in an interview over the weekend about how we’re going to bring down inflation, how are we going to bring down food costs. Bringing down energy prices is major for that energy goes into every cost that we have in our economy. So seeing this we would look at as bullish and not bearish either for energy companies as we see them as have being being very well capitalized right now as well.

Tyler Herriage [00:24:19]:
Deregulatory efforts will also help them bring down costs and you know their break even costs. Then the where they’re making a profit on oil comes down. So we need, we don’t need as high of oil prices but oil down over 2% on the day to 73 a barrel. And finally here for today, bitcoin bouncing back a little bit from its lows here. Dig it down to 97,000. Really 98. It just barely broke below 98 there. Now back to $101,563 of Bitcoin, down roughly two and a half percent on the day today.

Tyler Herriage [00:24:55]:
We do remain extremely bullish on bitcoin going forward from here as well. Folks, that’s all that we have time for here today. Please be sure to subscribe to receive our VRA podcast every day at the market close. You sign up@vletter.com Click the podcast link at the top and we’d love to have you with us. Thanks again for tuning in. Until next time. We’ll see you back here tomorrow for the close.